Brent crude headed for the lowest close in almost four years after Iraq followed Saudi Arabia and Iran in cutting prices. West Texas Intermediate’s discount to Brent narrowed.
Iraq, OPEC’s second-biggest producer, will sell its Basrah Light crude to Asia at the biggest discount since January 2009, the country’s State Oil Marketing Co., known as SOMO, said yesterday. Iran last week said it will sell oil to Asia in November at the biggest discount in almost six years, matching cuts by Saudi Arabia. “OPEC is not ready to act and that’s making people continue to sell,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Until we see some comments out of OPEC suggesting they are going to stabilize the price, I think the market will probably keep falling.”
Brent for November settlement slid $1.36, or 1.5 percent, to $88.85 a barrel at 1:35 p.m. New York time on the London-based ICE Futures Europe exchange. A settlement at this level would be the lowest since November 2010. The volume of all futures was 20 percent above the 100-day average. Prices are down 23 percent from this year’s highest close of $115.06 on June 19.
WTI for November delivery dropped 12 cents to $85.70 a barrel on the New York Mercantile Exchange. Volume was 8 percent above the 100-day average. The U.S. benchmark crude was at a discount of $3.15 to Brent. It closed at $4.39 on Oct. 10.
Iraq, Iran
Iraq set its November Basrah Light crude at $3.15 below the average of Oman and Dubai prices for buyers in Asia, SOMO said in an e-mailed statement. That’s the biggest discount since January 2009 and compares with $2.50 for October. It will sell the crude to Europe at $5.40 below Dated Brent, from $4.75 in October. Prices for U.S. buyers were unchanged.
State-run National Iranian Oil Co. cut its selling prices for buyers in Asia, two people with knowledge of the decision said Oct. 9. A week before, Saudi Arabia, the world’s largest oil exporter, reduced the price of Arab Light crude for Asia to the lowest since December 2008.
Middle East producers including Iran, Iraq and Kuwait almost always follow Saudi Arabia’s lead when deciding whether to raise or lower export prices. The scale of November’s cuts prompted speculation some members are ready for a price war.
Market Share
“OPEC is still giving no indication that it might take steps to shore up prices,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report. “OPEC countries appear to be more interested in defending their market shares at present than stabilizing prices.” The Organization of Petroleum Exporting Countries must cut its output target by 500,000 barrels a day in 2015 and 2016 to balance the market, Morgan Stanley analyst Adam Longson said in an e-mailed report.
“Somebody has to cut production,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
Venezuela will seek an extraordinary OPEC meeting to address falling prices, the nation’s foreign ministry said in a Twitter post on Oct. 10. Kuwaiti Oil Minister Ali Al-Omair said many countries considered the group’s current output quota to be “reasonable and fair” and the country hasn’t received an invitation to any emergency meeting, state news agency Kuna reported yesterday. OPEC increased output by 402,000 barrels a day in September to 30.47 million, the group’s Vienna-based secretariat said in a monthly report Oct. 10.
Crude Inventories
U.S. crude inventories probably climbed 2.45 million barrels last week to 364.1 million, according to a Bloomberg survey before an Energy Information Administration report Oct. 15. Stockpiles jumped 5.02 million barrels in the week ended Oct. 3, the biggest gain since April, the EIA, the Energy Department’s statistical arm, said last week.
Hedge funds and other large speculators lowered net-long positions in WTI futures by 4.8 percent in the seven days ended Oct. 7, the most in five weeks, according to the Commodity Futures Trading Commission data show.
Gold Futures Rise to Three-Week High as Dollar Declines
Gold futures rose to the highest in three weeks as concern that the global economy is faltering stoked bets that the Federal Reserve will keep U.S. interest rates low, driving the dollar down.
Fed Vice Chairman Stanley Fischer said yesterday that weak growth outside the U.S. may prompt the central bank “to remove accommodation more slowly than otherwise.” Last week, gold jumped 2.4 percent, while the dollar fell against a basket of 10 currencies, ending the longest rally since June 2010. “It’s all about the dollar and interest rates, because gold is dollar-denominated, no matter how you look at it,” George Gero, a New-York based precious-metals strategist at RBC Capital Markets LLC, said in a telephone interview.
Gold futures for December delivery rose 0.7 percent to $1,230.20 an ounce at 11:21 a.m. on the Comex in New York. Earlier, the price reached $1,238, the highest for a most-active contract since Sept. 17. The dollar fell as much as 0.5 percent against the currency basket.
On Oct. 3, gold erased this year’s gains as signs of expansion in the U.S. economy increased speculation that the Fed would increase borrowing costs sooner than anticipated. Higher rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value.
“A reversal of the macro dynamics that had placed downward pressure of gold and the return of physical demand enabled prices to stage a bounce,” Barclays Plc said in a note.
Through Oct. 10, gold climbed 1.6 percent this year. In March, the price gained as much as 16 percent amid tensions in Ukraine and the Middle East. Silver futures for December delivery climbed 0.4 percent to $17.365 an ounce. On the New York Mercantile Exchange, platinum futures for January delivery rose 0.1 percent to $1,263.30 an ounce. Palladium futures for December delivery fell 0.2 percent to $783.15.
Hedge Funds Miss Out on Gold Gains as Bull Holdings Drop
Hedge funds reduced bullish gold wagers just before prices rallied the most since June on concern that global economic growth is weakening.
The net-long position in New York futures and options contracted for an eighth week, U.S. government data show. The International Monetary Fund cut its 2015 world growth forecast on Oct. 7. Minutes of the Federal Reserve’s last meeting showed policy makers saw slowing foreign expansion as a risk to the U.S., fueling bets that record-low borrowing costs will persist.
About $1.1 billion was added to the value of exchange-traded products backed by bullion last week, the most since July. The 30-day historical volatility for futures traded in New York climbed on Oct. 9 to the highest in more than a month amid renewed investor interest. Prices rose 10 percent in the first half of the year as tensions in Ukraine and the Middle East spurred demand for a haven asset.
“I don’t think we’re in a growth scenario where the Fed will be aggressively raising interest rates,” Ralph Aldis, a money manager at U.S. Global Investors, which oversees $1.1 billion, said in an Oct. 8 phone interview. “We’ve had no wage growth, and that’s probably some of the reason people are saying it doesn’t feel like we’re out of a recession yet. We’ll probably start to see some cracks here.”
Price Rally
Futures added 2.4 percent to $1,221.70 an ounce on the Comex in New York last week, the biggest gain since June and snapping five straight losses. The Bloomberg Commodity Index of 22 raw materials rose 0.2 percent last week, while the MSCI All-Country World Index of equities fell 2.7 percent. The net-long position in gold slid 1.2 percent to 37,275 futures and options contracts in the week ended Oct. 7, according to U.S. Commodity Futures Trading Commission data published three days later. Short holdings betting on a drop contracted 0.2 percent, the first decline in eight weeks.
Gold dropped 5.9 percent last month as signs of an improving U.S. job market spurred speculation the Fed was moving closer to increasing borrowing costs. The minutes released last week highlighted growing concern among policy makers who say the strengthening dollar could hurt exports. The central bank maintained a pledge to keep interest rates low for a “considerable time.”
Physical buying has returned in India as the festival of Diwali approaches and also in China, with the rolling monthly average volume traded on the Shanghai Gold Exchange reaching the highest since May 2013, Barclays Plc said in a report Oct. 10.
U.S. Employment
Fed Bank of Dallas President Richard Fisher said Oct. 10 he expects growth to pick up in the next six months, even with signs of a slowdown in other parts of the world. The U.S. added 248,000 jobs in September, pushing unemployment to a six-year low of 5.9 percent. Gold prices will drop to $1,050 over the next 12 months as the U.S. economy accelerates, Goldman Sachs Group Inc. said Oct. 2.
Prices fell 8.4 percent last quarter as signs of a quickening U.S. recovery helped push the dollar to its biggest gain in six years. Holdings in global bullion ETPs are the lowest in five years. The Fed on Sept. 17 reduced monthly bond purchases to $15 billion, keeping it on track to announce an end to the stimulus program this month.
The Bloomberg Dollar Spot Index, which measures the currency against 10 U.S. trading partners, strengthened 6.2 percent since the beginning of July.
‘Bearish Indicators’
“There’s a convergence of bearish indicators: dollar strength, the Fed’s monetary shift towards reduction of liquidity, as well as a nonexistent inflation rate or disinflationary trends on a global basis,” Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion, said by phone Oct. 9. “What’s good for the U.S. economy is not good for gold investors.” Net-bullish holdings across 18 U.S.-traded commodities fell 3.9 percent to 435,323 contracts as of Oct. 7, the CFTC data show.
Speculators got less bullish on oil, reducing bets by 4.8 percent to 192,208 contracts. West Texas Intermediate retreated 4.4 percent last week, the most since January.
Combined net-long positions across 11 agricultural products rose 1.7 percent to 238,113 contracts, a second increase.
The net-long position in corn dropped 14 percent to 73,093 futures and options. Prices in Chicago climbed 3.3 percent last week, the most since mid-August. The grain is rebounding after falling this month to a five-year low on the outlook for a record U.S. crop.
Slower Harvest
Rainy weather is slowing the harvest, and corn export sales advanced 23 percent in the week through Oct. 2. Shipping fees along the Mississippi River, the world’s busiest inland waterway, have more than doubled to a record in the past year, threatening to strand more grain during the busiest time of year for handlers in the U.S., the biggest global exporter.
“The story has been big crops, but that’s not news,” said Fiona Boal, a senior analyst at Hermes Investment Management in London, which manages about $1.7 billion in assets. “The story now is can we make sure we get the big crop out of the ground, and do we have issues with logistics, what happens with farmers selling and decisions about storage.”
source: Bloomberg
Iraq, OPEC’s second-biggest producer, will sell its Basrah Light crude to Asia at the biggest discount since January 2009, the country’s State Oil Marketing Co., known as SOMO, said yesterday. Iran last week said it will sell oil to Asia in November at the biggest discount in almost six years, matching cuts by Saudi Arabia. “OPEC is not ready to act and that’s making people continue to sell,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Until we see some comments out of OPEC suggesting they are going to stabilize the price, I think the market will probably keep falling.”
Brent for November settlement slid $1.36, or 1.5 percent, to $88.85 a barrel at 1:35 p.m. New York time on the London-based ICE Futures Europe exchange. A settlement at this level would be the lowest since November 2010. The volume of all futures was 20 percent above the 100-day average. Prices are down 23 percent from this year’s highest close of $115.06 on June 19.
WTI for November delivery dropped 12 cents to $85.70 a barrel on the New York Mercantile Exchange. Volume was 8 percent above the 100-day average. The U.S. benchmark crude was at a discount of $3.15 to Brent. It closed at $4.39 on Oct. 10.
Iraq, Iran
Iraq set its November Basrah Light crude at $3.15 below the average of Oman and Dubai prices for buyers in Asia, SOMO said in an e-mailed statement. That’s the biggest discount since January 2009 and compares with $2.50 for October. It will sell the crude to Europe at $5.40 below Dated Brent, from $4.75 in October. Prices for U.S. buyers were unchanged.
State-run National Iranian Oil Co. cut its selling prices for buyers in Asia, two people with knowledge of the decision said Oct. 9. A week before, Saudi Arabia, the world’s largest oil exporter, reduced the price of Arab Light crude for Asia to the lowest since December 2008.
Middle East producers including Iran, Iraq and Kuwait almost always follow Saudi Arabia’s lead when deciding whether to raise or lower export prices. The scale of November’s cuts prompted speculation some members are ready for a price war.
Market Share
“OPEC is still giving no indication that it might take steps to shore up prices,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report. “OPEC countries appear to be more interested in defending their market shares at present than stabilizing prices.” The Organization of Petroleum Exporting Countries must cut its output target by 500,000 barrels a day in 2015 and 2016 to balance the market, Morgan Stanley analyst Adam Longson said in an e-mailed report.
“Somebody has to cut production,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
Venezuela will seek an extraordinary OPEC meeting to address falling prices, the nation’s foreign ministry said in a Twitter post on Oct. 10. Kuwaiti Oil Minister Ali Al-Omair said many countries considered the group’s current output quota to be “reasonable and fair” and the country hasn’t received an invitation to any emergency meeting, state news agency Kuna reported yesterday. OPEC increased output by 402,000 barrels a day in September to 30.47 million, the group’s Vienna-based secretariat said in a monthly report Oct. 10.
Crude Inventories
U.S. crude inventories probably climbed 2.45 million barrels last week to 364.1 million, according to a Bloomberg survey before an Energy Information Administration report Oct. 15. Stockpiles jumped 5.02 million barrels in the week ended Oct. 3, the biggest gain since April, the EIA, the Energy Department’s statistical arm, said last week.
Hedge funds and other large speculators lowered net-long positions in WTI futures by 4.8 percent in the seven days ended Oct. 7, the most in five weeks, according to the Commodity Futures Trading Commission data show.
Gold Futures Rise to Three-Week High as Dollar Declines
Gold futures rose to the highest in three weeks as concern that the global economy is faltering stoked bets that the Federal Reserve will keep U.S. interest rates low, driving the dollar down.
Fed Vice Chairman Stanley Fischer said yesterday that weak growth outside the U.S. may prompt the central bank “to remove accommodation more slowly than otherwise.” Last week, gold jumped 2.4 percent, while the dollar fell against a basket of 10 currencies, ending the longest rally since June 2010. “It’s all about the dollar and interest rates, because gold is dollar-denominated, no matter how you look at it,” George Gero, a New-York based precious-metals strategist at RBC Capital Markets LLC, said in a telephone interview.
Gold futures for December delivery rose 0.7 percent to $1,230.20 an ounce at 11:21 a.m. on the Comex in New York. Earlier, the price reached $1,238, the highest for a most-active contract since Sept. 17. The dollar fell as much as 0.5 percent against the currency basket.
On Oct. 3, gold erased this year’s gains as signs of expansion in the U.S. economy increased speculation that the Fed would increase borrowing costs sooner than anticipated. Higher rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value.
“A reversal of the macro dynamics that had placed downward pressure of gold and the return of physical demand enabled prices to stage a bounce,” Barclays Plc said in a note.
Through Oct. 10, gold climbed 1.6 percent this year. In March, the price gained as much as 16 percent amid tensions in Ukraine and the Middle East. Silver futures for December delivery climbed 0.4 percent to $17.365 an ounce. On the New York Mercantile Exchange, platinum futures for January delivery rose 0.1 percent to $1,263.30 an ounce. Palladium futures for December delivery fell 0.2 percent to $783.15.
Hedge Funds Miss Out on Gold Gains as Bull Holdings Drop
Hedge funds reduced bullish gold wagers just before prices rallied the most since June on concern that global economic growth is weakening.
The net-long position in New York futures and options contracted for an eighth week, U.S. government data show. The International Monetary Fund cut its 2015 world growth forecast on Oct. 7. Minutes of the Federal Reserve’s last meeting showed policy makers saw slowing foreign expansion as a risk to the U.S., fueling bets that record-low borrowing costs will persist.
About $1.1 billion was added to the value of exchange-traded products backed by bullion last week, the most since July. The 30-day historical volatility for futures traded in New York climbed on Oct. 9 to the highest in more than a month amid renewed investor interest. Prices rose 10 percent in the first half of the year as tensions in Ukraine and the Middle East spurred demand for a haven asset.
“I don’t think we’re in a growth scenario where the Fed will be aggressively raising interest rates,” Ralph Aldis, a money manager at U.S. Global Investors, which oversees $1.1 billion, said in an Oct. 8 phone interview. “We’ve had no wage growth, and that’s probably some of the reason people are saying it doesn’t feel like we’re out of a recession yet. We’ll probably start to see some cracks here.”
Price Rally
Futures added 2.4 percent to $1,221.70 an ounce on the Comex in New York last week, the biggest gain since June and snapping five straight losses. The Bloomberg Commodity Index of 22 raw materials rose 0.2 percent last week, while the MSCI All-Country World Index of equities fell 2.7 percent. The net-long position in gold slid 1.2 percent to 37,275 futures and options contracts in the week ended Oct. 7, according to U.S. Commodity Futures Trading Commission data published three days later. Short holdings betting on a drop contracted 0.2 percent, the first decline in eight weeks.
Gold dropped 5.9 percent last month as signs of an improving U.S. job market spurred speculation the Fed was moving closer to increasing borrowing costs. The minutes released last week highlighted growing concern among policy makers who say the strengthening dollar could hurt exports. The central bank maintained a pledge to keep interest rates low for a “considerable time.”
Physical buying has returned in India as the festival of Diwali approaches and also in China, with the rolling monthly average volume traded on the Shanghai Gold Exchange reaching the highest since May 2013, Barclays Plc said in a report Oct. 10.
U.S. Employment
Fed Bank of Dallas President Richard Fisher said Oct. 10 he expects growth to pick up in the next six months, even with signs of a slowdown in other parts of the world. The U.S. added 248,000 jobs in September, pushing unemployment to a six-year low of 5.9 percent. Gold prices will drop to $1,050 over the next 12 months as the U.S. economy accelerates, Goldman Sachs Group Inc. said Oct. 2.
Prices fell 8.4 percent last quarter as signs of a quickening U.S. recovery helped push the dollar to its biggest gain in six years. Holdings in global bullion ETPs are the lowest in five years. The Fed on Sept. 17 reduced monthly bond purchases to $15 billion, keeping it on track to announce an end to the stimulus program this month.
The Bloomberg Dollar Spot Index, which measures the currency against 10 U.S. trading partners, strengthened 6.2 percent since the beginning of July.
‘Bearish Indicators’
“There’s a convergence of bearish indicators: dollar strength, the Fed’s monetary shift towards reduction of liquidity, as well as a nonexistent inflation rate or disinflationary trends on a global basis,” Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion, said by phone Oct. 9. “What’s good for the U.S. economy is not good for gold investors.” Net-bullish holdings across 18 U.S.-traded commodities fell 3.9 percent to 435,323 contracts as of Oct. 7, the CFTC data show.
Speculators got less bullish on oil, reducing bets by 4.8 percent to 192,208 contracts. West Texas Intermediate retreated 4.4 percent last week, the most since January.
Combined net-long positions across 11 agricultural products rose 1.7 percent to 238,113 contracts, a second increase.
The net-long position in corn dropped 14 percent to 73,093 futures and options. Prices in Chicago climbed 3.3 percent last week, the most since mid-August. The grain is rebounding after falling this month to a five-year low on the outlook for a record U.S. crop.
Slower Harvest
Rainy weather is slowing the harvest, and corn export sales advanced 23 percent in the week through Oct. 2. Shipping fees along the Mississippi River, the world’s busiest inland waterway, have more than doubled to a record in the past year, threatening to strand more grain during the busiest time of year for handlers in the U.S., the biggest global exporter.
“The story has been big crops, but that’s not news,” said Fiona Boal, a senior analyst at Hermes Investment Management in London, which manages about $1.7 billion in assets. “The story now is can we make sure we get the big crop out of the ground, and do we have issues with logistics, what happens with farmers selling and decisions about storage.”
source: Bloomberg